Tag Archives: austerity

Jobs First Because Jobs Fix Deficits

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What happened to jobs? The pubic wants government to do something about jobs and getting the economy moving, and in DC the only thing is this weird argument about … anything but jobs and getting the economy moving! “Fiscal cliff?” What about jobs? Fixing the economy will fix the debt, not the other way around.

Economic Storm Clouds

The economy is slowing, with signs of trouble on the horizon. Recent economic indicators are not so good. Trade deficits are huge, a bad manufacturing number this week, Europe still stagnant and slipping (because of austerity), China slowing. NY Times says, “Recent economic data “surprisingly weak,” and “recovery sputtering.” From Republicans Balk at Short-Term Stimulus in Obama Plan,

“As the debate rages in Washington, data has shown the recovery once again sputtering, with the underlying rate of growth too slow to bring down the unemployment rate by much and some of the economic momentum gained in the fall dissipating in the winter.”

It’s Demand Stupid

This slowing is not happening because people are “worried about the fiscal cliff.” It is because there are not enough jobs, and the wages of the people who do have jobs are stagnant with all the gains in the economy going to a very few at the very top of the economic ladder. Europe is slowing because they attacked deficits instead of hiring people to do jobs. We are slowing because the government stopped stimulus and started cutting.

The slowdown is because the jobs are not coming back fast enough, wages are stagnant and falling, and the government is not doing anything about it. And that means that there is not enough “demand” in the economy to cause investment and hiring.

Businesses want customers, not tax cuts — and certainly not cutbacks. In fact most of what DC is focused on — austerity — will make the situation worse, possibly even much worse, as it has done in Europe.

Small Stimulus In President’s Proposal

To his credit the President’s “fiscal cliff” proposal does contain a limited stimulus to help keep the economy moving, at least at its current slow pace. But we really need a massive investment in jobs. The President’s offer of $50 billion in stimulus for one year is insufficient, but at least it is something. The Republicans offer less than nothing, they want government efforts cut.

Jobs Fix Problems: The DC elite, major media and lobbying apparatus is focused like a laser beam on how much to cut, so the wealthy can have even more. But the public isn’t stupid, they get that there is a disconnect because they know that jobs fix problems, jobs fix deficits and lots of jobs fixes wage stagnation. Strong employment = wage growth. Strong wages = strong economic growth.

The People Spoke — The Election Was Supposed To Have Decided This

The election made it obvious, the public wants jobs, wants government services like Medicare and Social Security protected and even expanded, and more than anything wants taxes raised on the ultra-wealthy.

The election made the public’s wishes clear. But Washington continues to simply ignore what the public wants, and is focused like a laser beam on what a few billionaires want.

It was like there was an intense focus on the election, the public spoke, and then the very next day all attention shifted back away from what the public wanted and onto this austerity agenda that helps the billionaires at the expense of the rest of us.

A Government Of, By and For We, the People

I recently watched the PBS series The Dust Bowl. One thing that stood out was how the government actually cared about what was going on with the people, was trying to solve the problems, and how the people got it that the government was on their side.

Today it is a very different story, with the government isolated and largely under the control of wealthy and powerful interests. The current “fiscal cliff” absorption being only the most recent example.

The public doesn’t get what is going on in DC. They want JOBS first, they want the meager government services they do get preserved and even expanded. And they want a fix to the problem of the last few decades of wage stagnation, corporate domination, outsourcing manufacturing, deferring infrastructure maintenance, unionbusting, age discrimination, and cancelling TV shows everyone likes. (Just seeing if you are still reading.)

Economy Has Lots Of Jobs That Need Doing

Jobs solve problems. Right now the country has lots of problems, so the country needs lots of jobs, which solve problems. And by great coincidence right now the country needs lots of things done. The country needs to repair and modernize its infrastructure. The country needs to update its electrical grid. The country needs to make its buildings and homes more energy efficient. All of these are things that improve the economy in the long run. And the remarkable thing is that all of these are things that will have to get done sooner or later.

So the country could just hire people to do those jobs that need doing — like FDR did. How hard is it to understand that?

1) Hire people to modernize the infrastructure and make buildings and homes energy efficient.

2) All those people are participating in the economy again: paying taxes, buying things, not getting food stamps and unemployment.

3) The economy is much more efficient because of the work that got done on the infrastructure and energy efficiency.

4) The newly efficient economy is more than able to pay off the cost of all the work that was done — that had to be done eventually.

Republicans Obstructing Everything

The current Republican view is that government itself hurts the economy, is “in the way,” and that taxes and government spending “take money out of the economy.” So they continue to block all efforts to revive the economy through jobs programs, investment in infrastructure, even helping the unemployed.

They say that providing unemployment benefits keeps people from being forced to take the lowest-paying, nastiest, most demeaning job that comes along. But progressives believe in democracy and say that’s the point of helping each other — that we are a country where we are in this together to build mutual prosperity — unemployment benefits prevent a death spiral of continually falling demand.

Republicans talk about “pro-growth” policies, always meaning tax cuts for the rich. They say that only rich people “create jobs” so giving more and more money to these “job creators” will eventually trickle down to the rest of us. But all actual evidence shows that this policy does nothing to promote growth, only inequality. In fact the times of highest taxes on the wealthy have been the times of more jobs and more economic growth shared by more of us.

Business Gets It

I recently came across this Comstock Partners, Market Commentary: The Deficit Did Not Cause The Recession; The Recession Caused The Deficit,

Both Wall Street and Washington have lost sight of the major cause of the deep recession and exceedingly slow economic recovery. To hear all the talk, the major concern is about the impending fiscal cliff and the federal budget deficit. Fix the fiscal cliff and make major reductions in the deficit, they say, and all will be ok. We think they’ve got it wrong.

Go read why…

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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Saying “Fiscal Cliff” Is Taking Sides

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The term “fiscal cliff” is a one-sided propaganda phrase that misinforms and triggers public fear and anxiety. The fiscal cliff is not a “cliff” and the country isn’t going to fall off anything at the end of the year. Journalists: don’t help the misinformers — don’t say or write “fiscal cliff.” Congress: when people are scared and misinformed our Congress should pause, step back and help inform us instead of rushing to take advantage of the fear.

What The Fiscal Cliff Is

At the end of the year the Bush tax cuts expire and several budget cuts start to phase in (including military spending cuts.) This reduces the deficit, and some of those cuts will slow the economy if nothing is done to restore them in the next several months. That is the “fiscal cliff” that you are hearing so much about. Except it isn’t a cliff, it kicks in gradually, Congress has a lot of time to work it out and can fix anything that is a problem.
That’s right, if nothing is done in the next several months — there is no “cliff” at the end of the year — some of those cuts will slow the economy. All the screaming and hysteria are about putting pressure on the “lame duck” Congress to do something in a big hurry, outside of the accountability of democracy and before the President and progressives have more leverage.

What The Fiscal Cliff Is NOT

Most people I talked to over Thanksgiving apparently think the “fiscal cliff” is the government runs out of money on December 31 because the deficit is so big and all kinds of terrible things happen on January 1. This is sort of the opposite of what is going on. Even the few who didn’t think it was about the country running out of money were misinformed in one way or another, with most thinking something terrible happens January 1.
The “fiscal cliff” is about taxes going up and budget cuts, which reduce the deficit. And absolutely nothing in anyone’s life will change on January 1, or for some time (weeks, months) after.
That’s right, all the people who were hysterically screaming about the deficit are hysterically screaming now because of deficit cuts. Go figure. But the reason is that they have an agenda.

Journalists Should Not Help Misinform And Scare People

The very term “fiscal cliff” misinforms and scares people. Some media outlets, like FOX News, exist to misinform and scare people. But responsible media outlets should try to help the public understand complicated issues, not help scare and misinform.
Any journalist using the propaganda phrase “fiscal cliff” is taking the side of misinforming and scaring.

Settle Down, Beavis

Everyone should settle down. There is no “cliff.” No one is going to fall off of anything. And after the first of the year the President and progressives have much more leverage in this fight than they do now — hence all the pressure to act before then.
When people are this misinformed and scared the Congress owes it to the public to stop, take a break, work to inform the public and not act in a panic. Journalists, especially, owe it to the public to inform, not misinform and scare.
Update – I wrote this and went to bed. I wake up, and there is a perfect example in the Monday NY Times titled, Debt Reckoning, The Fiscal Deadline In Washington. The write-up in the morning NYTimes email is “The New York Times is beginning a new online feature that will chronicle the talks on the fiscal cliff between President Obama and Congressional leaders.”
The clear message of this headline and summary is that the country is in crisis because of debt. The public cannot help but get the impression that the country goes broke in a few weeks. As I explained above (and as Paul Krugman explains today’s in Fighting Fiscal Phantoms) this is really the opposite of what is happening.
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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Jobs Are For We, The People. Budget Cuts Are For The Billionaires. Who Will Prevail?

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We have millions unemployed with millions more underemployed or just gave up looking, our infrastructure is literally crumbling, our trade deficit is horrendous, our “safety net” has eroded below minimum acceptable standards, pensions are cut or gone, the climate is getting more and more unpredictable and dangerous, and how many other problems can you name? But the billionaires will tell you that our biggest problem is too much government — the very entity that exists to fix those problems. Will we get the jobs that We, the People want or the cuts in government that the billionaires are pushing for?

Deficit Hysteria Is About Cutting Government

Keep this in mind in the coming months — the deficit hysteria and the “fiscal cliff,” are all about cutting government and the things We, the People do for each other, so that the billionaires can have more. Who benefits if we cut government – Medicare, Social Security, the “safety net” programs, education, health and safety regulation and inspection, environmental controls, bank regulation, etc.? All of these help We, the People but are in the way of the billionaires.
How do we get to this bizarre point where DC elite, the corporate media, etc are all talking about cutting the safety net and the things we do for each other, when the obvious problem is jobs? Why isn’t this vast media machine writing and talking and showing videos about jobs and jobs and jobs?

Surplus To Deficit — What Changed?

Before Reagan the country did not have a big debt problem – and then we did. Reagan implemented changes that create huge yearly deficits that added up to big debt. When Clinton left office we had huge budget surpluses, and we were actually paying off the debt. Bush implemented some changes that immediately turned the surpluses into deficits, and left office with a $1.4 trillion deficit — in one year.
So … something changed under Reagan and then under ‘W’ Bush. Are the deficit cutters talking about reversing those changes? Are they talking about fixing the things that caused the deficits that added up to this huge debt?

Sacrifice

The deficit problem came from tax cuts for the rich, the size of the military budget (Reagan doubled it, ‘W’ Bush doubled it again), effects of the trade deficit, and the revenue loss and safety-net costs (due to lack of jobs) that fall out from the Wall Street financial crisis.
Instead of fixing what caused the deficits and debt, the elites say we should all make “sacrifices” to fix the problem. Except, of course, there are no “sacrifices” for the very ones who benefited from those changes Reagan and Bush made. They got huge, huge tax cuts and to pay for the results of those tax cuts We, the People are being pushed to accept “sacrifices.” No one is talking about putting the top tax rate back up to pre-Reagan levels — back when we took care of the infrastructure and funded our schools, etc. They are not talking about hiring millions to modernize our infrastructure and make our buildings energy-efficient.
Starting about the same time as Reagan cut taxes on the wealthy the wages of people who work for a living began to stagnate and the income and wealth inequality started to accelerate. In other words, almost all the benefits from gains in our economy started to go to a few at the top of the ladder. Some dramatic numbers illustrate this. For example, you may have read that in 2010 93% of the gains from the “recovery” went to the top 1%. Or you may have read recently that the wealth of the Forbes 400 went up by $200 billion last year.
But now that it is time to “sacrifice” who is supposed to do the sacrificing? We, the People, and programs like Medicare, Social Security, the “safety net,” health and safety regulations, environmental protections, etc.

Another Billionaire Weighs In

Ross Perot is in the news today whipping up deficit hysteria, with a huge-headline assist from the Drudge Report pointing to this Politico story, Ross Perot: No 2012 endorsement, saying we could “lose our country” or “be taken over.”

“We’re on the edge of the cliff, and we have got to start fixing it now. Otherwise, we’re leaving a disaster to our children’s and our grandchildren’s future,” he said.
… Perot talks about his fear of the United States being taken over.
“If we are that weak, just think of who wants to come here first and take us over, and the last thing I ever want to see is to see this country, our country taken over because we’re so financially weak we can’t do anything and we’re moving in that direct. … We could even lose our country if we don’t get this fixed and straightened out and nobody that’s running really talks about it, about what we have to do and why we have to do it. They would prefer not to have it discussed.

Krugman On Democracy

Today Paul Krugman, in The Real Referendum, points out that the public is turning against candidates who are exposed as wanting to cut the things We, the People do for each other,

Voters are, in effect, being asked to deliver a verdict on the legacy of the New Deal and the Great Society, on Social Security, Medicare and, yes, Obamacare, which represents an extension of that legacy. Will they vote for politicians who want to replace Medicare with Vouchercare, who denounce Social Security as “collectivist” (as Paul Ryan once did), who dismiss those who turn to social insurance programs as people unwilling to take responsibility for their lives?
If the polls are any indication, the result of that referendum will be a clear reassertion of support for the safety net, and a clear rejection of politicians who want to return us to the Gilded Age. But here’s the question: Will that election result be honored?

What he means is that the public’s wishes are clear, but there are indications that after the election the “Grand Bargainers” are going to try again to cut the things We, the People do for each other, so the billionaires can have it even better. This is what the Simpson-Bowles plan is, this is what the “fiscal cliff” hysteria is about.
Will the election results be honored? Will it be jobs (We, the People) or budget cuts (the billionaires).
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Austerity Suicide — Literally

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You might be hearing about the “Fiscal Cliff.” And you might be hearing about a “Grand Bargain.” You certainly have heard about “Simpson Bowles.” You will be hearing more and more about these strangely-named things because the usual suspects are cranking up the usual propaganda machine again, getting the usual DC elite ready to play out another of the usual take-from-the-people-to-give-to-the-rich games right after the election. This time it’s a push for austerity.

Why Deficits?

I always start any discussion of deficits and debt by reminding people that the country had a big budget surplus before Bush cut taxes for the rich, and doubled the military budget.

Deficit history: Reagan dramatically cut taxes on the wealthy and corporations. He doubled the military budget. Huge deficit resulted and the country began accumulating massive debt. They called it “strategic deficits,” a plan to “starve the beast” by bankrupting the country and forcing cuts to government, to the things government does for We, the People, and the ways government protects us from exploitation by the wealthy and powerful.

After 12 years of Reaganomics people were fed up, and elected Clinton. Clinton raised taxes on the rich. Those increases combined with the stock market bubble created a surplus and we were paying off the debt, and then something changed. ‘W’ Bush again cut taxes for the wealthy and again doubled the military budget and now the deficits are enormous. So here we are.

But fixing what caused the deficits is not on the table. It never is, because that doesn’t fit the plan.

Fiscal Cliff

They say the country faces a “Fiscal Cliff” at the end of the year. After the election the Bush tax cuts for the wealthy expire. And – this is a bit complicated – something called “sequestration” also kicks in. This is a series of budget cuts that happen because of the “debt ceiling” deal, when Republicans held the debt ceiling hostage and threatened to put the country into default, demanding that we immediately take trillions out of the economy. The sequestration deal was a compromise that was intended to force the Congress to agree to a bipartisan solution, which failed.

The sequestration includes military cuts, which our billionaire-backed DC elite believe would ruin the economy when combined with expiration of the Bush tax cuts — because in their minds tax cuts do not cause deficits and unlike other government spending military spending creates jobs. So to avoid the “Fiscal Cliff” after the election Congress is supposed to meet to keep the military budget intact, keep taxes on the rich from rising and cut the things our government does for We, the People.

Why After The Election?

That pesky democracy thing keeps on getting in the way of Wall Street’s plans for our economy. But after the election comes what’s called a “lame duck” session of the Congress. The legislators who have been chosen by the people aren’t in office yet, the ones who have been defeated are still there and the ones who were re-elected know that anything they do will be long forgotten by the next election. Democracy and the will of the people will not be a factor. Every poll says the public wants immediate action on jobs and no cuts in the things government does for We, the People.

If Obama is re-elected the post-election debate will be between the Obama deficit plan, a “Grand Bargain” based on the “Simpson-Bowles” plan vs the Ryan plan — the budget the House Republicans passed that privatizes Medicare and reduces spending on most things government does for our people. If Romney is elected all bets are off.

Simpson-Bowles

Simpson-Bowles is a budget plan put together by a Republican Senator and a Director of the Wall Street bank Morgan Stanley. After the President’s National Commission on Fiscal Responsibility and Reform (“Deficit Commission”) failed to make recommendations, the two came up with a plan that cuts Social Security, cuts a number of other things government does for our people, cuts a bit from military and cuts tax rates on the rich and corporations, calling it “reform.” (The plan also eliminates the home mortgage interest deduction, for example.)

Important point: At least Simpson-Bowles is not a “cuts cause growth” plan. It is sold as a deficit plan, even though it cuts taxes at the top and for big corporations. It clearly asks that any cuts not take place until the economy has improved because cuts slow growth.

Grand Bargain

The “Grand Bargain” is the idea that Democrats and Republicans can reach a compromise involving Republicans “allowing” tax “reform” that eliminates some tax deductions like the home mortgage interest deduction and reducing tax rates on the wealthy and corporations, in “exchange” for cuts in things government does for us, including Medicare, Social Security and Medicaid. (These cuts do not eliminate the need, they just shift the cost away from the government onto the larger economy.) (If this sounds like a “bargain” that entirely benefits the wealthy and large corporations, that’s just how Washington works these days.) (“Reform” always means cutting out things government does for We, the People and reducing taxes on the wealthy.)

Austerity

Austerity is the word used to describe attempts to lower budget deficits by cutting government spending on the things that government does for its citizens.

The theory is that cutting way back on government will cause the economy to grow because government is “in the way” and helping citizens “takes money out of the economy.” Also, when government provides fewer safety-net services unemployed people are forced to take any work they can get, which drives wages down and increases corporate profits. Government cutbacks also mean they can’t enforce regulations, which unleashes businesses to pollute, commit fraud, cut safety procedures and other things government polices that restrict corporate profits.

But austerity literally “takes money out of the economy.” Public-employee wages and pensions are cut. Government services and safety net programs are cut. Public assets are sold off for immediate cash (reducing the government’s income in later years). So the demand side of the economy is reduced as people are not able to spend.

The Results Of Austerity

In practice the theory that removing government makes the economy grow has not worked out. Several European countries have been severely cutting budgets, and the result has been that the economies in the “austerity” countries have suffered. These economies appear to have fallen into a downward cycle where the “reforms” reduce demand, growth stalls, this reduces tax revenue, which means the deficit-cutting is not effective. (And meanwhile the economies are ruined and people are in misery.)

The austerity cycle happening in Europe works something like this:
Bankers demand “austerity” which drives up unemployment, cuts demand and slows economic growth. The reduction in economic growth causes tax revenue to shrink and increases use of whatever “safety net” programs remain, thereby increasing budget shortfalls.

So bankers demand more “austerity” which drives up unemployment, cuts demand and slows economic growth. The reduction in economic growth causes tax revenue to shrink and increases use of whatever “safety net” programs remain, thereby increasing budget shortfalls. .

So bankers demand more “austerity” which drives up unemployment, cuts demand and slows economic growth. The reduction in economic growth causes tax revenue to shrink and increases use of whatever “safety net” programs remain, thereby increasing budget shortfalls.

So bankers demand more “austerity” … well you might be starting to get the picture.

Recession Resulting From Austerity

These are the GDP growth rates in European “austerity” countries:

Spain expects -1.7% from 0.4% 2011

Greece -10% to 11%

Portugal -1.2%

Italy -0.7%

Ireland -1.1%
UK -.7%

Chart from Think Progress, CHART: HOW AUSTERITY IS SQUASHING EUROPE’S ECONOMIC GROWTH.

Unemployment Resulting From Austerity

These are the official unemployment rates in European “austerity” countries:
Spain 24.6%
Greece 24.4%
Portugal 15%
Italy 10.7%
Ireland 14.9%
UK 8%

Austerity NOT Lowering Debt

Here is a chart of the debt-to-GDP ration as these countries shrink their GDP – and tax revenue – through austerity (click for larger):

Decline Resulting From Austerity

CNBC: Europe Facing Mental Health “Catastrophe” as Crisis Worsens,

Europe is approaching a crisis as the region’s debt crisis and austerity measures increase the rates of depression, suicide and psychological problems – just as governments cut healthcare spending by up to 50 percent, according to campaigners, policy makers and health organizations.

NY Times: ‘Shocking’ Dip in Britain’s Output Reflects European Stress

Guardian: Portuguese death rate rise linked to pain of austerity programme,

Portugal’s health service is being forced into sweeping cuts as last May’s EU/IMF bailout terms begin to bite

Catholic Online: European economic crisis takes emotional toll

Suicides Resulting From Austerity

Alternet, April: Crisis to Suicide: How Many Have to Die Before We Kill the False Religion of Austerity?
Telegraph, April: Italian businessman becomes country’s 25th ‘austerity suicide’ of the year

CNN, April: Austerity drives up suicide rate in debt-ridden Greece

Digital Post, July: Austerity takes its toll with suicides increasing in Greece

Tampa Bay Times, August: Suicide rates rise in Europe amid job losses and severe cutbacks

Digital Post, August: Italian dies after setting himself alight in austerity protest

Reuters, August: Study links British recession to 1000 suicides,

A painful economic recession, rising unemployment and biting austerity measures may have already driven more than 1,000 people in Britain to commit suicide, according to a scientific study published on Wednesday.

CNN, September: Death and taxes in Italy

Watch the following news reports if you can stomach it:

What You Can Do

So the experiment in austerity that is playing out in Europe is coming to the US after the election – when democracy can’t intervene.

But the way to reduce deficits is to grow the economy. When people have jobs they pay taxes and use fewer social services. Jobs programs that come out of fixing our infrastructure and making us less dependent on oil also make our economy more competitive in the future so they pay for themselves.

Contact your member of Congress and let them know that you do not think this is the time to cut the budget. Let them know that you want to see jobs programs, infrastructure maintenance and improvements, increase the safety net so people are not forced to take any work, cut the age when people can get Medicare and Social Security and increase the benefits so people can retire and open up jobs and renegotiate trade deals that are sucking us dry.

Tell them jobs fix deficits — you want to grow us out of deficits, not pretend that cuts will work. Cuts make deficits worse.

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Are Republicans Ready To Drop “No-Tax” Pledge?

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Republicans have been holding to a no-tax pledge for decades as a strategy to undermine government. But more and more people are noticing that our schools, roads, police and fire departments, bridges, courts, food-safety system — and everything else non-military that our government does — are starting to fall apart. At the same time, Republican-created anti-deficit hysteria is starting to backfire on Republicans themselves. So are some Republicans starting to back off?

But First

Before any deficit discussion begins people should be reminded of one very important and relevant fact: When ‘W’ Bush took office we had a huge budget surplus and we were on track to pay off the entire national debt in just ten years. In other words, our country’s debt would be entirely paid off by now, and there would be no emergency at all. But Bush changed some things, and said the return of budget deficits was “incredibly positive news,” and now we have a huge deficit and debt. The cause of our deficits and debt has implications for any discussion of what can be done about our deficits and debt.

Continue reading →

Need More Jobs And Less Sabotage

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Another lackluster jobs report with 80K new jobs and an unchanged 8.2% unemployment, Keep in mind that we lost 815,000 jobs in Bush’s last month, but this still is not good enough. Republicans are intentionally sabotaging job-creation efforts thinking it will help them in the coming election. How do we stop this and get things moving?
In the chart below, the red lines on the left are the Bush years. On the right are the Obama years. Those red lines just keep going down, with a job loss above 800,000 as Obama takes office. Then you see the lines shooting up — the effect of the “stimulus.” The leveling off is the effect of the program’s end — the period of Republican job sabotage.

Romney In 2006

Watch Mitt Romney in 2006 explaining why a recovery takes time:

“I came in and the jobs had been just falling right off a cliff, I came in and they kept falling for 11 months. And if you are going to suggest to me that somehow the day I got elected, somehow jobs should have immediately turned around, well that would be silly. It takes awhile to get things turned around. We were in a recession, we were losing jobs every month.”

Jobs Report

The U.S. economy has added more than 4.3 Million private sector jobs in the last 28 months, while losing
Dean Baker, writing at the Center for Economic and Policy Research, Job Growth Remains Weak in June, Unemployment Steady at 8.2 Percent,

Restaurant employment grew at an average rate of 29,000 in the winter months; it has grown by just 13,000 a month over the last four months. Retail employment grew by 22,000 a month in October through January. Since January, employment has fallen by a bit more than 1,000 jobs a month.
Construction employment grew by an average of 48,000 a month from November to February. In the last four months it has fallen at an average rate of 14,000 a month. This drop is difficult to reconcile with Census data that show construction spending up 1.1 percent from February to May.
While the overall picture in the establishment data was weak, there were some positive signs. The local government sector added 4,000 jobs in June indicating that employment may be leveling off. Manufacturing added 11,000 jobs, maintaining its modest rate of growth. The health sector added just 13,000 jobs, about half the normal pace. This is likely an anomaly, but if not, it would imply a slower rate of growth of health costs.

Job Sabotage

Isaiah Poole writes in, Jobs Report: Challenge Congress To Act, Obama To Fight,

As we’ve repeated time and again, the corruption of the Obama agenda by the corporatists and anti-government ideologues in both political parties began when the 2009 Recovery Act emerged as a $787 billion program, more than half of which was tax cuts, instead of the more than $1 trillion in additional spending that was needed to begin adequately repairing the damage of the 2008 financial crash.
Since then, Republicans have assaulted the economy at every opportunity, forcing an austerity agenda of budget-cutting at the very time that the federal government should have been stepping up its spending in key areas, both to bring our infrastructure up to 21st-century needs and to prevent layoffs of teachers, first responders and other essential public workers by cash-strapped state and local governments. From June 2009 to May 2012, 605,000 state and local public sector jobs were cut. If public sector jobs had instead grown at the same pace as the three previous economic recoveries, there would be an extra 1.2 million jobs, and that level of additional employment would have supported the creation of an additional 500,000 jobs…
When the White House and Democrats in Congress tried several times to pass elements of the American Jobs Act, $450 billion worth of job-creation initiatives, Republicans in the House voted as a solid bloc against the efforts, and Senate Republicans filibustered the legislation. The 2 percentage-point reduction in worker payroll taxes was the only major component that survived. Among the opponents is Romney, who has argued that cutting government spending at all levels is necessary to “help the American people” even though, as Tyson said, the teachers, firemen, and police who are being laid off “are American people who help other American people.”
Late last month, Congress pat itself on the back for passing a two-year surface transportation funding bill that is at best a status-quo stop-gap… The obstacle in the way was once again House Republicans, who refused to support the longer-term funding commitment needed by state and local transportation planners without numerous “poison pills,” including provisions that would have authorized construction of the Keystone XL pipeline without robust environmental review and would have ended federal regulation of hazardous coal waste disposal from power plants.
If it were not for congressional Republicans’ repeated obstruction or dilution of virtually every significant job-creation proposal sent to Congress since 2009, unemployment today would likely be under 7 percent instead of stubbornly persisting at around 8 percent. [emphasis added]

The Scariest Chart

Here is the chart of jobs doring this recession compared to previous recessions:

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Pension Gimmicks Blamed On Workers

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The student loan deal is badly needed. It should have just been extended – duh! But the 1 percenters took it hostage and demanded their pound of flesh before We, the People can preserve even this little bit of what we do for ourselves. So as part of the “sweetener” for those 1 percenters there is a corporate pension giveaway in the deal that has nothing to do with student loans. It appears they are going to let companies underfund pensions — money that should be set aside for worker pensions tomorrow will instead go into 1 percenter pockets today — and are setting up for a taxpayer bailout (or just stiffing retirees) later.

Pension Calculations Are Tricky But Regulated

This is kind of tricky, so bear with me. When companies (and governments) put money into pension funds they have to calculate how much will be needed to pay the promised pensions. This involves estimating things like how long (and how many) people will live, and how much “return” (interest, stock price increases,dividends…) to expect as the money is set aside. Key point: If you expect a too-high rate of return you can set less aside now (and put it in your pocket,) but when the time comes to pay the pensions you won’t have enough.
This is supervised by government standards and regulations. They say how much of a rate of return is allowed to be used in these calculations. A higher expected-rate-of-return allowance means less has to be set aside, so more money can go into 1 percenter pockets. So there is a lot of pressure from corporations to let them get away with overestimating, and therefore putting more in their pockets today. Since this is complex, it is easier to get away with diverting promised-worker-retirement money into 1 percenter pockets.
This student loan deal apparently lets corporations claim a higher expected rate of return, thereby diverting more money today into 1 percenter pockets.

Money Into Worker Pensions Or 1 Percenter Pockets?

For a long time the government has been allowing pension funds to use a too-high estimated rate of return, with the result that many pensions are now underfunded. Money that should have gone into savings to pay worker pensions was diverted into 1 percenter pockets, either through improved corporate bottom lines in the case of companies, or through lower taxes in the case of state & local governments. (Of course, many companies shifted worker-pension promises into 1 percenter pockets using the 401K scam — you fund your own retirement, on your own, with little help, and have to know how long you’ll live, and it turns out badly every time — but that’s for another post.)
In fact, this worker-set-asides-for-later vs 1 percenter-pockets-today issue is similar to what happened with the Social Security Trust Fund. Money from workers was set aside into the fund but was used to pay for tax cuts (and massive military increases). Now 1 percenters are demanding austerity — cutbacks in the things We, the People do for each other — instead of workers getting the money back from where the money went, namely the 1 percenters.
And since this is about money for worker retirees, and retired workers don’t have big, influential PR firms while 1 percenters do, it is convenient and easy to blame workers when the promised money isn’t there for their retirement.

The Much-Hyped Public-Employee Pension Crisis

The supposed public-employee pensions crisis is partly the result of state and local governments not setting aside enough money to pay up on pension promises (because of tax cuts). It is also partly caused by Wall Street scamming on those same governments as they got into riskier investments trying to get a high enough rate of return to make good on their pension promises. But the blame is being placed on the workers themselves.
The post Discover The Network Out To Crush Our Public Workers traced just a few of the corporate-conservative think tanks (really just PR firms) promoting the idea that public-employee unions are responsible for pension shortfalls. Almost all of these organizations traced back to Wall Street firms and individuals for their governance or funding. They are engaged in a campaign to divert attention and blame the workers themselves for pension shortfalls,

These corporate/conservative organizations are very good at manipulating the media and public opinion — it is their purpose. Their “experts” are well paid and always available to talk to reporters, appear on TV and radio shows and write articles and opinion pieces for newspapers, blogs and for their network of similar organizations. Their “reports’ and “studies” reach the conclusions that fit the strategy, and are crafted to sound just right. And there are so many of them! The result is development of “conventional wisdom” about what is going on in our society. This is why that conventional wisdom more and more reflects the corporate/conservative line. And right now the corporate conservative line is that we should think that public employees and their unions are responsible for state and local budget shortfalls.

See also Understanding The Attacks On Public Employees, Ten Holiday Attacks On Public Employees and Are Public Employee Unions Strangling Us? Also, Rick Smith And Dave Johnson Counter The Attack On Public Employees.

Others See It, Too

NY Times Editorial, The Deal on Student Loans,

The pension provision is not ideal. It could mean that more companies will underfinance their pension liabilities, shortchanging employees down the road. Lawmakers have tried to address that potential shortfall by strengthening the agency that insures private pensions with more money from higher premiums.

Thus from the Competitive Enterprise Institute, usually a most unreliable source. (The check from the big corps who want to underfund pensions must have been late.) In this case it is the same gimmick but added the the highway bill…: Threat of Pension Fund Bailouts Lurks in Senate Highway Bill, “Pension Smoothing” a License to Make Up Numbers,

The bill … would amend the Employment Retirement Income Security Act (ERISA) to allow for an accounting gimmick known as “pension smoothing,” whereby pension managers spread losses out over several years, while overestimating projected investment returns.
Specifically, this provision would expand the range of allowable projection figures, starting this year at a 20 percentage point range, to 60 percentage points after 2015. This is essentially a license to make up numbers for income projections four years out from now. …
“This accounting trick will likely expose taxpayers to potential pension fund bailouts in the future. ” …
“It would further remove pension investment return projections even further from reality, by expanding the range of allowable projections so broadly as to render them meaningless.”

Making Things Worse

To get a deal that keeps student-loan interest rates low enough for more people to afford to go to college, we had to pay off the 1 percenters with this “pension-smoothing” deal. Such is the way of Washington since we shifted from a democracy (rule by the people, for the people) to a plutocracy (rule by the rich, for the rich). Or, in this case a 1 percenter kleptocracy (rule by the rich, stealing from everyone).
But make no mistake, this deal makes the country’s future pension problems even worse. It diverts even more money from promised pensions into 1 percenter pockets. The result will be clear in 10, 20 or 30 years when people are retiring and the money isn’t there. Taxpayers will be asked for ever more “austerity” to cover money that was diverted to the 1%.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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European Austerity – What’s Actually Happening?

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Are we “going the way of Greece?” Should we cut spending to head off a “debt crisis” here?
Conservatives in Europe and America say cutting back on what democracies do for their citizens is the solution to our economic troubles because it will bring economic growth that helps everyone. But this is not what’s happening where it is tried. These are not stupid people. Maybe economic growth wasn’t the goal of austerity.

What They Said Would Happen

Greece and others have been confronted by lenders demanding very high rates before they will make loans. This increases their debt payments to even more dangerous levels, so lenders demand even higher rates. Financial elites are forcing “austerity,” with Greece cutting government employees, pensions, etc. and privatizing public assets, saying this will free up more money for debt payments. Meanwhile European leaders say that austerity is needed everywhere, that cutting government spending will restore “confidence” which will get businesses investing and hiring again, which will boost economic growth.
Economists and anyone with a brain warned that the austerity approach would only make things worse. Now that many European countries have implemented austerity measures the actual results these efforts can be measured.

What Actually Happened

What the financial elites predicted is not what is happening, the cuts are making the economic situation much worse. Taking money out of the economy didn’t grow the economy! Instead of increased “business confidence” bringing about a round of investment and hiring, these countries are instead experiencing further economic slowdown. As public employees are laid off and citizens’ benefits reduced the resulting reduction in demand slows economic growth further. This reduces tax revenues. Unemployment is soaring. And the threat is that deflation will only further inflate the debt burden.

In The cruel stupidity that is economic austerity at Daily Kos this weekend, Lawrence Lewis outlined just how bad things are as a result of austerity policies,

How bad is it?

The economies of Europe are imploding, as conservative governments continue to pursue exactly the wrong policies at exactly the wrong time. …

But this is not really a surprise. It is exactly what was predicted. And now that it is clear that austerity is making things worse they are demanding more austerity as a cure.

Financial Elites Are Not Stupid

So here is the thing. Everyone can see that this is the result—the expected result—of austerity policies. And Europe’s financial elites are not stupid people—not by a long shot! Perhaps they can see the obvious, because it’s obvious, and therefore we might conclude that their campaign pushing austerity isn’t about growing the economy – it’s about something else — they have a different agenda.

When smart people are forcing something to happen we need to look at what is happening, and realize perhaps this is what they wanted to happen. Maybe economic growth wasn’t austerity’s goal at all. Maybe the results we see— the results we all knew would come from austerity—are the results they wanted.

What Else Happened?

The above-listed effect of austerity are not the only results. Forced privatization is also occurring. Here are a few examples from recent news:

European railway companies eye Greek network sale,

Three European railway companies are interested in buying all or part of Greece’s railway business, as the debt-laden country sells assets to satisfy its lenders, people familiar with the discussions told Reuters.

Greece: 14 firms formally express interest in privatization of DEPA state gas company,

Greece says 14 companies, including a subsidiary of Russian gas company Gazprom, have formally expressed initial interest in buying Greek state gas firm DEPA under the debt-crippled country’s mammoth privatization program.

Greece seeks Israeli buyers for ports, companies, roads,

As part of austerity measures, Greek government looking to sell stakes in major companies, development projects; head of privatization agency says Israeli investors already expressed interest…

In Greek Debt Crisis, Government Puts its Policemen Up For Rent,

With the economic crisis plaguing the country, drastic means have been taken to replenish the public coffers. It is in this context that the Greek government has adopted a measure allowing the use, for a fee, of the National Police and its equipment for private needs.

While the Ministry of Citizen Protection (in charge of the country’s security services) said the move will help to “pay for the cost of using police material and infrastructure, and allow modernizing them,” the average citizen’s security is being seriously compromised and it raises the question of how far Greece is ready to go to cut state funding.

Greece Opens Bidding For Rhodes Property,

ATHENS — Greece invited bids for property in the popular tourist destination of Afantou in Rhodes Tuesday, as part of a long-awaited privatization program to raise EUR19 billion by 2015 in aid of its huge debt crisis.

This is the fourth international real estate tender launched by the Greek government-established Hellenic Republic Asset Development Fund (HRADF).

Strong Investor Interest In Planned Sale Of Former Athens Airport Area

The country’s privatization agency said Tuesday there was strong investor interest in the planned sale of the former Athens airport area, marking the latest step in the country’s efforts to raise some EUR19 billion from the sale of state assets by 2015.

Privatization is happening. Greece is being forced to sell off public assets as a condition of getting help with its debt.

Question: If these assets are contributing to Greece’s debt problem, why would investors want to buy them? If these assets are bringing revenue that could help cover the debt, why would the financial elites want Greece to sell them? Unless forcing Greece to sell them was the point.

Shock Doctrine

Naomi Klein’s book The Shock Doctrine makes the case that financial elites have been following a strategy where they take advantage of crises and the resulting panic (and sometimes they make the crisis happen and whip up panic.) Crisis and panic set up chaotic environments in which it is easy to swoop in with pre-packaged “solutions” and take all the stuff. We see this shock-doctrine cycle over and over again: crisis, panic, panic accelerates, financial elites swoop in and take all the stuff. (America had its own experience recently of a crisis that generated terrible panic, with financial elites then swooping in and taking all the stuff. )

Debt often leads to such a a crisis. The book Confessions of Economic Hit Man exposed the strategy of convincing the leadership of underdeveloped countries to take on high debt. Then when it becomes difficult to carry the debt, financial elites swoop in and take all the stuff.

America’s Debt

In the United States our own financial elite are demanding “spending cuts” and other austerity measures as well — even though we can see in front of our faces what resulted from European austerity policies. Conservatives try to whip up panic, claiming our national debt will force the country into bankruptcy (and tried to prove it by nearly forcing the country into bankruptcy last year.) After forcing tax cuts for the rich, again and again, they now say we have to “cut spending” (but not spending on oil company subsidies or military — estimated upwards of $1 trillion this year.) They demand austerity — cuts in spending on things democracy does for its citizens.

But remember, at the end of the Clinton presidency the United States was paying off its debt. Federal Reserve Chair Alan Greenspan greenlighted the Bush tax cuts, saying that Clinton was paying down the country’s debt too fast! When the surplus vanished President George ‘W’ Bush said that a return to deficits was “incredibly positive news” because it would lead to a debt crisis that would force cutbacks in government.
The cycle repeats, supposed crisis, panic is whipped up, elites offer their “solution”, then swoop in and take all the stuff. Will we fall for it again?

See Also

In The Zombie Rises: The Return of Simpson Bowles CAF’s Bob Borosage writes,

After experiencing the horrors of this misguided policy, European leaders will eventually turn back to trying to get their economies moving again. What we need this fall is a different grand bargain—a global agreement, like that that was forged in early 2009, for coordinated action by governments to reflate the economy —to borrow and spend to put people back to work.

For this to occur, the bipartisan elite fixation about inflicting austerity now must be challenged. If we are to avoid a lost decade or worse, we need action to support still weak and staggering economies. Global coordination would be the best way to achieve that. That requires putting a stake in Simpson-Bowles, the Boehner-Obama grand bargain and other zombies.

In America will not go the way of Europe at the Washington Post, Ezra Klein says Greece’s problem is that lenders believe the government might actually default, which the US can’t do.

In Ezra Klein: Barking Up The Wrong Tree Borosage responds that Greece’s austerity is the problem—such cuts make economies worse. Jobs are the answer to deficits.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.

Simpson-Bowles Zombie Returns

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President Obama and many Democrats spent much of 2011 talking about deficits instead of doing something about jobs. Now, a too-close election is on the horizon (too-close because of spending 2011 talking about deficits instead of doing something about jobs) and we’re being forced back to talking about deficits instead of jobs — by a Democrat!

Senate Budget Committee Chairman Kent Conrad says he is going to introduce the “Simpson-Bowles” deficit plan as his fiscal year 2013 budget resolution. This is a plan put forward by Alan Simpson, a retired Republican Senator who hates Social Security, and Erskine Bowles, a member of the Board of Wall Street’s Morgan Stanley. So here we are once again with the same old same old plan from the same old same old elites. Namely: cuts in Social Security and other things We, the People do for each other, combined with even more tax cuts for the rich. This austeridiocy plan to grow the economy by taking money out of the economy is a billionaire-backed zombie that never dies.

CNN: Bowles-Simpson back on table,

A key senator said Tuesday he would try to revive the so-called Bowles-Simpson plan as a starting point in negotiations over a long-term debt-reduction plan.

Democrat Kent Conrad, the Senate Budget Committee chairman, announced he would present the plan as his opening bid at the committee’s budget mark-up on Wednesday.

Murdoc’s (FOX) WSJ: Conrad’s Budget Surprise: Simpson-Bowles,

A key senator said Tuesday he would try to revive the so-called Bowles-Simpson plan as a starting point in negotiations over a long-term debt-reduction plan.

… The original Bowles-Simpson plan would reduce deficits by at least $4 trillion over 10 years by cutting defense and discretionary spending, curbing federal entitlement costs and reforming the tax code.

“Reforming” the tax code as used here means lowering tax rates for the rich and corporations, getting rid of a number of deductions to make it look like it isn’t such a big tax cut and then later putting back lots of new deductions and breaks for the rich and corporations.

Now Mr. Conrad could try to force the first Senate vote on the measure, though it would likely first come from the members on his committee. Mr. Conrad was on the Simpson-Bowles commission and voted for the plan in 2010. He’s also on the so-called Gang of Six lawmakers looking for a legislative path to put the proposal into law. The plan was originally designed by former Republican Sen. Alan Simpson of Wyoming and former Clinton White House Chief of Staff Erskine Bowles.

Push It Through After Election?

Citizens don’t get to vote on austerity plans.

This time they’s going to try to get this austerity plan through when few are paying attention: after the election but before the newly elected Congress comes in. This way democracy won’t get in the way, and the public doesn’t get a chance to react and hold legislators accountable. This might sound rather like the Greek austerity plan to cut working people’s wages, cut the things the Greek government does for its people, lay off public employees, and especially yo sell off the things the public owns and operates so a wealthy few can profit.

When the Greek Prime Minister proposed letting the public vote on this austerity plan he was removed, and bankers took control of the country, this is how it went:

Nov. 1, 2011: Greek PM puts bailout deal to public vote

Nov. 2: Greece sticks to bailout vote, as U.S., Europe weigh options
Nov 3: Greek prime minister abandons referendum on Greek debt plan

Nov. 9: Greek prime minister set to resign

Nov. 10: Ex-banker Papademos is new Greek prime minister

Ezra Klein talked with Conrad about his budget plan, and reports on the conversation in the Washington Post, Can Simpson-Bowles really pass the Senate?,

I’ve heard from some of my Republican colleagues who … said you’re doing exactly what needs to be done but we’re not going to be able to do something like this until after the election. And I think that’s true for many Democrats as well. … Simpson-Bowles put the vote of the commission after the 2010 election to try and insulate it from politics as much as possible. That’s what we’re trying to do here … I don’t expect a vote after the election.

… We should be swift to say to people, however, that compared to current law, it’s a $1.8 trillion tax cut.

Grand Bargain – Till They Go Back On The Deal

Aside from the whole subvert-democracy thing where they decide this after the election so no one can be held accountable, the record for “deals” is not good. The “debt-ceiling” hostage deal finally ended with Republicans agreeing to “sequestration” that includes military spending cuts. But it hasn’t worked out that way:

TPM: Bait And Switch: GOP Leaders Renege On Debt Limit Deal Defense Cuts

Oh, and if you really do want to do something about the deficit, think about this: Jobs Fix Deficits!

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.

Deficit Trouble – Right Here In River City!

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River City faces a terrible deficit, and if we don’t cut spending on the things We, the People do for each other right now, there will be trouble. We gotta do some austerity! We gotta eat that seed corn. We gotta stop taxing the 1% and stop paying for things the 99% need!
It’s a con as old as the hills. Whip up the people with fear, and then offer them the ready-made “solution.” In his post, Ya Got Trouble — A fresh look at an old con, Tom Sullivan nails it with a scene from The Music Man. For those not familiar with The Music Man, here is the lead-up: “River City ain’t in any trouble.” “Well, we’re going to have to create some.” Then the Republican Congressman Music Man goes out and whips the town into a state. He does it to sell them. (The following is from a local production, which YouTube allowed to be embedded here. To see the clip from the movie click here.)
.
From Sullivan’s post:

Trouble with a capital “T”
And that rhymes with “P”
and that stands for pool!

In one, short speech — building intensity as he goes — Professor Harold Hill gathers a crowd of onlookers and rattles off a litany of big city sins “the right kinda parents” worry about corrupting their children and their small town: sloth, drinking, gambling, being “stuck-up,” smoking, loose morals, and indecent pop culture. In a fevered crescendo, Hill warns parents of “shameless music • That’ll grab your son, your daughter • With the arms of a jungle animal instink!”

Sullivan explains the con:

Hill presses every button the people of River City, Iowa have to press, plus appeals to patriotism and God to create a city-wide moral crisis that four minutes earlier the townspeople didn’t know they had. Sound familiar?
Now strike pool. Insert contraception, voter fraud, death panels, or a half dozen other right-wing bogey men and the grifter’s pitch works the same. Today, Harold Hill would be working for Fox News or Americans for Prosperity. He’d be running American Crossroads, and making a lot more money.

This con has been perfected in recent years as The Shock Doctrine, forcing entire countries into debt or other crisis, then stepping in to plunder and privatize their resources, like what is happening to Greece right now.
Whipping Up Deficit Hysteria
This “con game” is what is happening to our own country as well, with the whipped-up terrification over deficits. The Reagan plan was cut taxes and increase military spending to force the country into debt, and then use the debt to force privatization of public resources into the hands of a few. George ‘W’ Bush said after cutting taxes on the rich and raising military spending that the resulting transformation of Clinton’s budget surplus into huge budget deficits was “incredibly positive news” because it would force us into near-bankruptcy. Yes, he said that.
But the solution offered — the current Republican budget that phases out Medicare and guts our government — doesn’t even cut the deficit! The Republican “austerity” budget starts with $10 trillion in tax cuts for the 1%! Then it guts most of what We, the People do for each other.
Don’t be fooled, it is just one more conservative con game.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Cuts and Consequences – How Budget Cuts Hurt The Economy

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Is smaller government really better for the economy? Conservatives chant that taxes and government “take money out of the economy” and we need to “cut and grow,” meaning if government spending is cut way back the economy will grow as a result. Europe’s conservatives are also forcing cuts in the things their governments do for regular people, claiming “austerity” will bring “confidence” that grows their economies. How is this experiment working out? What are we learning about the effect on the larger economy when government is cut?
What Does Government Do?
Almost everything the government does is because it needs to be done. We need roads, bridges, schools & colleges, dams, courts, police & fire departments, water management, etc. (We can discuss the need for military spending another time.)
These are all needed and contribute to the functioning of the economy. So if government is cut back and doesn’t do something that is needed, then how does it get done? Or does it just not get done? Either way, the real question we should be asking is what is the effect on the larger economy when our government cuts back on or stops doing needed things? If you save the “government” a bit of money but cost the economy a lot of money, are you saving money? Or are cuts in government really just shifting and even increasing the costs in the larger economy of doing these things?
Who Is Our Government For?
In the United States, our Constitution says that government is supposed to be of, by and for We, the People. The country was established after the colonists rebelled against the aristocracy of England — a few people who had all of the wealth and power and would not let the colonists have a say in how things were run and who would benefit. So they fought the Revolutionary War and established a country where “We, the People” all have an equal say, and to “promote the general welfare.” In other words, a country that aspires to be of, by and for the good of all of us.
So cutting back on government means cutting back on We, the People doing things for the good of all of us. It means cutting back on the things we have a say over. It means relinquishing the wealth and power that we hold in common to … well, just where does our common wealth and power go if our government is cut back?
Medicare, For Example
Republicans say we need to cut back on what the government spends on Medicare. But if you cut Medicare the health problems of elderly people and the larger problem of fast-rising health care costs in the larger economy don’t disappear. In fact, both problems just get worse.
The “Ryan Budget” that Congressional Republicans voted to approve actually converts Medicare into a program that gives seniors a voucher that pays for part of a private medical insurance policy that seniors have to shop for. The Center for Economic and Policy Research (CEPR), in Cost of Medicare Equivalent Insurance Skyrockets under Ryan Plan, took a look at that plan and explains what happens to the cost of health care. Summary: it shifts the costs to us, except each of us ends up paying as much as seven times as much as the same care costs under Medicare. From the CEPR explanation:

[The Republican] plan to revamp Medicare has been described as shifting costs from the government to beneficiaries. A new report from the Center for Economic and Policy Research (CEPR), however, shows that the [Republican] proposal will increase health care costs for seniors by more than seven dollars for every dollar it saves the government, a point missing from much of the debate over the plan.
… In addition to comparing the costs of Medicare to the government under the current system and under the [Republican] plan, the authors also show the effects of raising the age of Medicare eligibility. The paper also demonstrates that while [the Republican plan] shifts $4.9 trillion in health care costs from the government to Medicare beneficiaries, this number is dwarfed by a $34 trillion increase in overall costs to beneficiaries that is projected …

Repeat, the Republican plan to cut Medicare would cost the larger economy seven times as much as it cuts government spending.
Social Security, For Example
Conservatives have been trying to cut or gut Social Security for decades. While this might mean government has to pay out less of what is owed to seniors, such cuts would have a negative effect on the larger economy.
Social Security allows working people to retire with at least a minimal income. If this is cut many could not retire for many more years (if ever), which would increase the unemployment rate because their jobs would not open up. The same is true as the retirement age is increased – fewer job openings. If it is cut, the spending (on cat food) at local grocery stores and other necessities is reduced by the same amount. And the effect on children of retirees is increased, if they contribute to make up the difference.
This is why cutting Social Security or raising the retirement age only shifts costs onto the larger economy, dragging it down (and cruelly hurting our elderly).
Cutting Disease Control, For Example
One of the clearest examples of the way government helps us all, rich and poor, is the government’s Center for Disease Control (CDC). One of the jobs of the CDC is to help prevent the spread of infectious diseases. If an epidemic is spreading and killing people it doesn’t matter if those people are rich or poor. And if a serious outbreak spreads this can damage the economy as people are too sick to, or decide not to show up for work. So of course cutting back the budget of the CDC could cause damage to the economy in any given year and is certain to cause damage eventually. (The CDC budget was cut back 11% last year.)
Budget Cuts Hurt The Economy
The above are only a few examples.
A government budget cut is like a huge tax increase on regular people because it increases what each of us pays for the things government does — or forces us to go without. This is because cuts in government spending don’t actually cut the cost or the need for those things, they just shift those costs onto the larger economy. But because these shifts attack the economy-of-scale, transparency, integrity and public-good management that government provides, they almost always increase the costs and harms to the larger economy.

  • As government health care is cut (or not provided in the first place) each of us must take on those costs on our own, and as demonstrated, pay up to seven times what the same care would/could have cost.
  • As infrastructure maintenance and modernization is cut, our economy becomes less competitive, unemployment increases and our wages and spending power fall.
  • As spending on education is cut, our costs of educating ourselves and our kids increase. College costs soar. And the overall education level of our people will decrease, making our country less competitive in the world.
  • As environmental regulation and enforcement is cut the costs of the resulting health problems and cleanups increase and our quality-of-life will decrease.
  • As enforcement of labor laws is cut, our wages and protections fall.
  • As etc. is cut, the costs of etc. are shifted to the larger economy, and the total costs of accomplishing etc. actually increase.

As budgets are cut, the costs are increased and shifted to the larger economy.
Austerity In Europe
Several countries in Europe are severely cutting budgets. The result is that the economies in those countries are slowing. Reuters: Euro zone’s slump in late 2011 points to recession.

A collapse in household spending, exports and manufacturing sucked the life out of the euro zone’s economy in the final months of 2011, the EU said on Tuesday, showing the scope of the downturn that looks set to become a fully fledged recession.
… The European Commission forecasts a recession of the same magnitude this year. That would be the euro zone’s second contraction in just three years as the bloc’s debt crisis drags on a region that generates around 16 percent of the world’s economic output.
[. . .] The battle between austerity and growth was already evident in the fourth quarter. Euro zone government expenditure fell 0.2 percent, while industry contracted 2 percent and imports were down 1.2 percent, making for some of the worst readings since the world was dragged into the 2008/2009 financial crisis.

The austerity experiment is making the case: cutting government budgets just shifts costs and hurts the larger economy.
Who Benefits From Cuts?
Governments dance with the ones that brung ’em. Whoever controls government is naturally going to direct government to benefit them – and only them. We-the-People democracies do things for We, the People; plutocracies do things for plutocrats. So when, as now, plutocrats are running government, you will get a government that only does things that benefit plutocrats. And when We, the People were running government, we did things that benefit We, the People — all of us.
The plutocrats now demanding government budget cuts obviously understand that this will result in slowing economies, but don’t care — they are already fabulously wealthy. What they want is reduced taxes and increased power. They say that cuts will bring growth, in order to persuade people to accept cuts. Blocking governments from providing things that don’t directly benefit them and only them is a means to that end. And cutting government cuts government’s ability to reign them in.
What We, the People Want
When We, the People are running government we insist that government increases overall prosperity. We demand laws and regulations that bring us good wages, benefits and safe working conditions. We demand good public schools & colleges, parks, safety and opportunities for our smaller businesses to fairly compete. We insist on a clean environment, consumer protections, regulations on business behavior, rules against monopolies and (after learning the hard way) rules that keep banks from taking risks that threaten the economy. And we want controls and limits on the use of wealth and power by the 1%ers.
Plutocrats — the 1%ers — of course see all of these protections of regular people as hindering their power and ability to make as much for themselves as they can grab. Plutocrats just don’t see how public parks benefit them. They just don’t see why they should have to pay for public schools. What good do public schools do them, today? Plutocrats don’t see why it should be anyone else’s problem if old people don’t have health care — health care for seniors certainly isn’t their problem.
They explain that things for anyone other than themselves and their interests just “wastes money.” Things for regular people are not their problem. And when plutocrats run government, it isn’t their problem.
The fact is a public park “costs money.” Schools and infrastructure are just more “government spending.” Things like that just “redistribute income” because taxes on the income of plutocrats is used to build that park or school that anyone can use. The basic message of the plutocrat is, “Why should I pay for anything that benefits you?”
You and I might argue that this kind of austerity, cutting schools, Medicare, infrastructure, etc. slows the larger economy, hurting the plutocrats, too. But that doesn’t hurt the ones who are already rich, which is the definition of plutocrat. It puts more in their pockets, today, by lowering their taxes. They want out of taxes and they don’t want government (We, the People) interfering with their power.
What We, The People Need
Democracies where We, the People make decisions demand things that are good for regular people and their small businesses: pensions, health care, modernized infrastructure, good schools & colleges, child care, regulations on the behavior of giant corporations… This is why strong democracies have proven to be more prosperous for regular people and for longer than other forms of government that leave people on their own against the wealthy and powerful and drive all of the income and wealth to a few at the top. This is why so many regular working people in our country were so much more prosperous in the decades before the plutocratic 1%-favoring policies of Reagan steered us toward plutocracy.
Understand what is going on here. Demands for budget cuts and austerity are really about shifting from democracy to a system where regular people — the 99% — are on their own, up against the wealthy and powerful. This is about shifting from a system where regular people can be prosperous together, to a system where a few — the 1% — have all the wealth and power.
We, the People need democracy restored. We need to be in charge again, before the economy can improve.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Austeridiocy: Budget Cuts Take Money Out Of The Economy

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“The patient is sicker so we have to apply more leeches.” Countries that are trying to fix deficits with spending cuts are finding out that taking money out of their economies by cutting government is slowing their economies. Duh! Imagine that! So instead of cutting deficits the resulting slowdowns are making their deficits worse as tax revenues drop and joblessness goes up. So what are they proposing? More “austerity” spending cuts. I call them “austeridiots.”
It Didn’t Work So Do It More
See if you can find the logical flaw in this AP news report: French growth sputters to a halt in 2nd quarter,

The French government was put under further pressure to cut deeper into spending after figures Friday showed growth in Europe’s second biggest economy ground to a halt in the spring, in another sign that the global economy is facing rising recessionary threats.
With the worse-than-expected French growth figures suggesting a possible budget shortfall this year, government ministers may have to find additional savings…

Right, the cuts are slowing the economy, which means the deficits are worse, so they “have to find additional savings.” Cutting government – taking money out of the economy – slowed their economy, so they think they’ll solve the problem by taking more money out of their economy. Austeridiocy.
Austeridiocy Here, Too

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